Although Swiss Franc loans declined €274 million in the first half of the year, 80 per cent of the remaining €1,778 million are non-performing according to the head of the Cyprus Central Bank’s Supervision Division.

BRIEFING the Parliamentary Committee of Finance head of the CBC Supervision Division Yiangos Demetriou said that loans in Swiss Franc declined from €2,052 million in December 31 2015 to €1,778 million on 30th June 2016, adding however that 80% of these loans are considered as non-performing.

The problems with loans denominated in Swiss Franc (CHF) arose when the exchange rate in relation to the euro increased by 40% trapping borrowers who concluded such loans.

According to Demetriou out of €274 million reduction only €60 million concerned household loans whereas the remaining €214 million concerned corporate loans. These loans are held by three banks, Bank of Cyprus, Alpha Bank and, to a lesser extent, Hellenic Bank.

“From the figures it is evident that the schemes implemented by the commercial banks are more effective for legal persons and less effective for households,” Demetriou said.

Loans in CHF for households on 30 June 2015 amounted to €1,124 million of which €893 million for house purchase, whereas loans for primary residences amounted to €264 million. Corporate loans amounted to €654 million.

Demetriou noted that the reduction emerged in the context of debt repayments, debt write offs and conversion of loans from CHF to euro.

Replying to questions, Demetriou said that “more pressure will be exerted so that the banks improve their schemes and attitude,” towards the troubled borrowers.

MPs expressed concerns on the slow pace in restructurings of household loans and suggested the parliament should consider approving a law forcing the banks to be more generous in reaching settlements with the borrowers.

“Yes the banks should suffer in a way that would not create additional capital requirements. If the banks are called to cover a greater cost and if capital requirements arise these will be covered by the taxpayer,” Demetriou said.

Averof Neofytou, the Committee president said the Parliament could assist adversely affected borrowers “without harming those who suffered the biggest blow of the (financial) crisis.”

As part of a €10 billion bailout by the EU and the IMF to Cyprus in 2013, 47.5% deposits over €100,000 were converted to equity to recapitalise Bank of Cyprus, whereas Laiki Bank entered in resolution which whipped out approximately 80% of deposits over €100,000.

Neofytou said the banks have a buffer of 25% – 30% to assist the borrowers in finding the best possible solutions, but he cautioned that if a bill imposes losses exceeding the buffer “we would shoot the depositors in the foot once again”.

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Readers' comments

The Alpha Bank won their case against us for non payment in 2012 then enforced it through UK court and took balance of my UK property. As yet they have not re-possessed therefore we are managing the property on their behalf. We do not Hold T/D so cannot sell but are harassed by management for maintenance therefore have had to rent out to cover cost. The Bank have agreed to accept net rent towards payment of Judgement after we have caught up with management arrears which will take years at current rental rates. Not sure how we stand legally.

Simple matter to consider….How much commission did the banks earn from this mis-selling? Once we know what profit they made that could be used as a ball park figure for compensation.

If UK banks can be penalised for the mis-selling of Loan Protection which many borrowers probably did need but have jumped on the cash cow of compensation surely the Cypriot banks can be brought to task for this far more cunning plan.

Alpha Bank refuse to convert my CHF loan to GBP. They want to convert it to Euros. WHY !!!!!

Ed: Euro is the currency of Cyprus. I don’t know why the bank is refusing to convert your loan to GPB, it’s done this for other borrowers. Perhaps it’s because of the uncertainty on the future value of Sterling following the BREXIT vote?

It is good to hear the Cyprus government starting to recognise the problem and that the banks aren’t doing enough.

While a law forcing the banks to do better would be good in theory, what chance is there of them actually complying with it and what would be done if they didn’t?

The banks are already in breach of several laws and Central Cyprus and European Central Bank directives in both issuing the loans and the way they have managed them since and nothing has been done about that.

Perhaps the Cyprus government should focus on this instead of inventing more red tape.

There are thousands of us using what little money we have left to try to bring the banks to court. Having the Cyprus government join forces with us would make that happen.

At the end of the day, Bank of Cyprus, Alpha Bank and the others are all commercial enterprises. They should not be allowed to be above the law because of some idea that their demise would be a bad thing for Cyprus or the Euro.

The ECB and the CCB have the resources and ability to protect the currency and the economy while ensuring that every single person who has been affected is properly taken care of – even if that means having to pull the plug on these banks.

A percentage write down in the loan – whether it’s 25 or 30% or even more does not go far enough in putting things right and still leaves thousands of borrowers in a financial position they should never have been allowed to get into.

The views expressed in readers' comments are not necessarily shared by the Cyprus Property News.

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